Spurring Economic Development: More Aid Versus No Aid Debate

As preparations for funding the post-2015 development agenda get under way, the aid industry in all its forms – financial, food and technical assistance – has come under the microscope by two schools of thought.

There are those who reason that aid is still vital in the development of developing countries’ economies but needs to increase in a predictable manner to at least 0.7% of developed countries’ Gross National Income (GNI) as the Official Development Assistance (ODA) as agreed in 1970 and confirmed in theMonterrey Consensus and Doha Declaration and support priorities identified by governments in the south.

On the other hand, there are those who argue that assistance has, on balance, hurt the development prospects of developing countries. It should either be fundamentally rethought or terminated altogether.

Those who want to retain aid argue that it needs to be overhauled because it was born in the midst of the Cold War confrontation and supported dictators who opposed communism and has continued to support corrupt politicians that have aligned themselves with the West in the fight against terrorism.

Those who recommend termination reason that development after all is generated from within. Consequently, no matter how much money and technical assistance one provides, you can’t develop other people’s economies from outside. With reference to the Millennium Villages, it has been observed that there is no evidence that they are doing any better than other villages in the same countries.

Mindful that aid in all its forms of food, financial and technical assistance will not end in the foreseeable future, we need to make it deliver better results in the post-2015 development agenda. To do that we need to examine why aid has not worked as expected. Detractors have emphasized political and commercial motives of donor countries.

While recognizing that food aid has saved lives, provided school meals that have improved school attendance and performance especially of girls and created badly needed jobs, it has undermined local food production and delayed necessary agrarian reforms. For example, the introduction of cheap yellow maize undermined the locally produced white maize in some parts of southern Africa throwing peasants who could not compete into poverty.

On October 28, 2013 during a debate in the General Assembly on Agricultural Development, Food and Nutrition Security, the delegate of Brazil observed that “Domestic production and investments have also been further discouraged by food aid and its depressant impact on agriculture prices.”

Politically sensitive but necessary agrarian reforms to increase agricultural productivity and peasants’ incomes have also been delayed because food aid comes in during periods of food shortages that would have forced reforms to ensure food availability at all times. With specific reference to Africa, it has been observed that while food aid provided critical foreign exchange, government revenue and food, it didn’t play as a positive role in agricultural development as in Asia because of distorted policies.

The role of increased aid per se in economic growth and poverty reduction has also been questioned. It has been noted that by 1987 Africa had increased its share of aid to well over one third. However, increased aid failed to improve the continent’s economic performance in large part because aid was misallocated.

Another point worth mentioning regarding provision of assistance is the necessity to create an atmosphere that facilitates dialogue between development partners. The lesson from Tanzania is that the absence of a favorable environment due in large part to lack of experience on both sides in policy analysis and negotiations created tremendous problems. Thus, the need to build capacity to negotiate development assistance needs to be kept in mind.

Technical assistance has also come under heavy criticism especially regarding Africa. The late Mahbub Ul Haq wrote that Africa receives around $6 billion a year of technical assistance. Yet it has the lowest human development indicators in the world and it has perhaps received more bad advice per capita than any other continent.

And the few Africans that have been trained and acquired experience have migrated abroad in search of greener pastures.

The envisaged new global development agenda will need to grapple with these issues.